In response to the Covid-19 pandemic, Congress lawfully suspended monthly payment obligations and interest accrual on federally held student loans for a period limited to six months. When that statutory deferment period expired in September 2020, however, the department unilaterally extended it without congressional appropriation. The complaint challenges the legality of extending the suspension 30 months past the statutory expiration date, which has cost taxpayers over $150 billion from lost interest.
Congress enacted the Public Service Loan Forgiveness Program (PSLF) in 2007 to help 501(c)(3) nonprofit organizations like the Mackinac Center attract employees with a debt-relief incentive keyed to working ten years for nonprofits. The Department of Education’s suspending of repayment obligations is an unlawful form of debt relief that substantially reduces the incentives PSLF provides and thus undermines Congress’s goals in enacting that program. As NCLA has argued previously, reducing that incentive directly harms nonprofit employers.
So far, the Department of Education has issued eight separate extensions—most recently in November 2022—with ever-shifting legal excuses. The department first relied on economic hardship provisions of the Higher Education Act of 1965; then pivoted to the HEROES Act of 2003; then ceased citing legal authorities and stopped publishing new extensions in the Federal Register. It most recently falsely claimed that it had been relying on the HEROES Act all along. None of these purported justifications holds water.
Only Congress can categorically suspend repayment obligations for all student-loan borrowers nationwide, and only Congress can cancel the accrual of interest on student loan debt owed to the United States. The department initially issued a short extension to give Congress more time to extend the suspension legislatively, but electorally accountable lawmakers in Congress declined to extend the suspension of payment obligations and interest accrual any further, even as they repeatedly legislated other forms of Covid-19 relief. The department’s subsequent decisions to extend the deferments by administrative fiat thus ignored the law.